The
Crisis of Profitability: a Critique of
the Glyn-Sutcliffe Thesis

Written:1973;Source:
Manuscript. A version of
this article appeared in New Left Review I/80, July-August 1973,
pp45-62.Transcription/Markup:
Steve Palmer Copyleft: This
work is licensed under a Creative
Commons license permitting unrestricted copying for
non-commercial use.

In a
chapter on ‘Politics’ in British
Capitalism, Workers and the Profit Squeeze [1], Andrew Glyn and Bob
Sutcliffe
express the hope that their book will make a contribution to the
political
struggle for socialism.[2] Towards this end they have gathered together
and
analysed a great deal of statistical information in an original and
important
study. Before we begin what will be a critical review of the book, we
should
say that the Left can only be very grateful to the authors for making
what must
be the first serious empirical contribution towards an analysis of the
present
crisis of British capitalism. Their claim is that the capitalist crisis
in
Britain is converting the fight for the rights, wages and conditions of
the
workers into a simultaneous fight for a revolutionary political
strategy inside
the labour movement. With the recent check on the tide of working-class
militancy, as witnessed by the collapse of the fight against Phase II,
and with
the British economy now experiencing one of the fastest growth rates
since the
war, the present time is a suitable one to examine critically the
central
arguments of the book.

Scientific
socialism differs from other
‘socialisms’ in that for Marxists the historical
‘necessity’ of the new society
(socialism) is shown in the contradictory development of the old
society
(capitalism). This is what we mean by the materialist basis of the
revolutionary standpoint. We can put our argument in another way. If
the
capitalist mode of production can ensure, with or without government
intervention, continued growth and full employment, then the most
objective
argument in support of the revolutionary socialist position breaks
down. The
reformist perspective then becomes a reasonable one.

The
revival and remarkable growth of
capitalist production since the Second World War has given impetus and
apparent
support to those who reject the Marxist perspective. The prospect of a
capitalist system developing and functioning without serious
interruption
seemed to such reformists a real possibility. Social and economic
stability was
to be maintained by state intervention in the economy and with suitable
government policies the last pockets of poverty and despair could be
slowly
reformed away. However, the last few years have given this perspective
a severe
blow. The intensification of international competition, the
international
monetary crisis, chronic rates of inflation approaching the levels of
the
Korean War and the trend towards increasing unemployment with the
crisis of
profitability, indicate that the post-war boom is rapidly coming to an
end.

The
question remains, do the recent
inflationary-led booms in most capitalist countries alter this view?
Was the crisis
of the last few years merely the preparation for a new expansion of
production?
Or did it signify, once again, the extremely crisis-ridden nature of
capitalist
production, that is, of capitalism as a decaying system and one that
has long
outlived its historical ‘mission’. What perspective
does a Marxist analysis of
‘late’ capitalism hold for the revolutionary
movement in the next period? These
are critical questions.

It is
against such a background that we
must judge this book. Does it in any way adequately combat the
reformist
perspective? Will it bring home to the trade union leaders the
‘contradictions
between the workers’ demands and the ability of the system to
meet them’?[3]
What perspective does it offer for a revolutionary strategy in the
coming
period?

Unfortunately,
where the book offers a
consistent position, its central thesis is quite compatible with
reformism. It
does nothing to combat the ideological offensive of the ruling-class on
the
issue of inflation. On the contrary, it gives credence to the view that
high
wages are a primary cause of inflation. That the authors support the
union
drive for higher wage demands [4] in no way mitigates this failing.
Radical
reformism is reformism nonetheless. Wage constraint is only the other
side of
the radical coin. From the left side we have Glyn and
Sutcliffe’s position:
‘but when the wage struggle does threaten the survival of the
capitalist system
. . . it is time for workers not to moderate their wage demands but to
destroy
the system which exploits them.’[5] From the other side of
the debate, we have
the right-wing social democratic response. In the words of Wilfred
Beckerman:
‘as the inflationary threat is greater (than ever) so never
before has the need
for restraint been so vital.’[6] Both positions share common
ground but diverge
in evaluating the capitalist system. Neither position, in any coherent
sense,
is able adequately to invalidate the other; it is a matter of attitude.

Glyn
and Sutcliffe underestimate the
strength of reformism. Their exhortation that workers ‘must
see through the
argument that they should reduce their wage claims in the national
interest’ [7]
is too simple. The leadership of the TUC believes that the
‘national interest’
can be satisfied through a ‘high growth, high
incomes’ government strategy.
That is why they are once more engaging in talks with the Conservative
government. They have never challenged outright the simple equation;
large wage
increases necessitate price increases. All that the TUC leaders want,
is a
‘fairer’ policy, which they, and most trade
unionists, believe to be possible
with changed government policies, or for that matter, a changed
government.

It is
precisely against such points of
view, and Beckerman is only an extreme example, that a Marxist analysis
of
inflation would be directed. It should show that the working-class is
in no way
responsible for inflation. It should indicate how price rises far from
being
due to workers’ attempts to increase their wages, are the
result of the
intervention of the capitalist state in its attempt to maintain and
preserve a
system that has long outlived its stay. The remainder of this article
will
attempt to show that the theoretical inadequacy of Glyn and
Sutcliffe’s
position stems from their failure to understand Marxist political
economy.
Further, we shall illustrate how the ‘facts’ of the
present period fully
vindicate the Marxist view. Finally, we shall briefly indicate a
revolutionary
strategy for the working-class that flows from such an analysis.

The
Crisis of Profitability and the Falling
Rate of Profit

The
crisis developed, according to Glyn and
Sutcliffe, because the mounting demands from the working-class for a
faster
growth in living standards coincided with the growing competition
between
capitalist countries. [8] Wage increases could not so easily be passed
on as
price increases if British firms were to remain competitive. While we
fully
accept the significance and effect of the growing competition between
capitalist countries it is the first part of the explanation that we
challenge.
Indeed, a great deal of material in their own book contradicts their
own point
of view. The key factor that plays no theoretical central role in their
position,
and which they often mention in their discussion of statistical data,
is the growth
of the productivity of labour. That productivity has been doubling
every 10
years in Japan, every 15 years or so in the major EEC countries and
about every
30 years or so in the US and UK is a fact of enormous importance. Yet
they
cannot locate this in their analysis. [9]

Confused
about the basic relationships,
they state in one place: ‘Profitability is connected with the
expansion of
output through its effect on the rate of accumulation of capital
(investment),
which in turn is important in determining the rate at which
productivity
increases.’[10] In another place, they state that stagnation
had relatively
little to do with the decline of profitability. [11] Their consistently
argued
position would run something like this. The decline of profitability,
given the
intensification of international competition, is primarily due to
increasing
wage demands. This in turn slows down investment and therefore the
growth of
productivity which only makes the problem worse. While for Marx,
‘the rate of
accumulation is the independent not the dependent variable; the rate of
wages
the dependent, not the independent, variable’ [12] the
position for Glyn and
Sutcliffe is reversed. The decline of profitability and the falling
rate of
profit is due to increasing wage demands. The impulse behind such wage
demands
is the expectations of the working class, moulded in the period of
economic
expansion, being thwarted by the slow growth in living standards in the
late
sixties. And adding fuel to this fire is the realization of increased
bargaining
strength which has contributed to the growth of working-class
militancy.[13]
Political economy is replaced by social psychology, Marxism by a
version of
Ricardianism.

While
we cannot ignore the factors which
Glyn and Sutcliffe stress, they are in no sense primary in determining
the
crisis of profitability. Marx makes the point admirably clear.
‘The rise and
fall in the rate of profit in so far as it is determined by the rise
and fall
of wages resulting from the conditions of demand and supply (in the
labour
market) . . . has as little to do with the general law of the rise or
fall in
the profit rate as the rise or fall in the market prices of commodities
has to
do with the determination of value in general.’[14] That Glyn
and Sutcliffe’s
position is quite consistent with their interpretation of Marxist
political
economy can be seen in Appendix B, ‘Marx’s view of
exploitation and capitalist
crisis’. It is summed up by their statement: ‘The
dramatically falling rate of
profit in Britain does not seem to have been caused to any significant
extent
by the increasing organic composition of capital but rather by an
increase in
labour’s share of the product (very roughly the equivalent of
a decrease in the
rate of exploitation). Logically this possibility is allowed for in
Marx’s
analysis.’[15] Unfortunately this is not the case. It is
worth quoting in full
a passage where Marx spells out the general law. ‘This mode
of production
produces a progressive relative decrease of the variable capital as
compared to
the constant capital, and consequently a continuously rising organic
composition of the total capital. The immediate result of this is that
the rate
of surplus-value, at the same or even a rising, degree of labour
exploitation,
is represented by a continually falling rate of profit . . . The
progressive
tendency of the general rate of profit to fall is, therefore, just an
expression peculiar to the capitalist mode of production of the
progressive
development of the social productivity of labour. This does not mean to
say
that the rate of profit may not fall temporarily for other reasons. But
proceeding from the nature of the capitalist mode of production, it is
thereby
proved a logical necessity that in its development the general average
rate of
surplus-value must express itself in a falling general rate of
profit.’[16]

It is
just this indispensable basis of the
Marxist theory of capital accumulation that Glyn and Sutcliffe have
rejected. [17]
In doing this they return to a Ricardian framework so fashionable at
the
present time. For them the most fundamental question is how the income
generated by production is shared between capitalists and workers. Marx
also
had something to say about this. ‘The habit of representing
surplus-value and
value of labour power as fractions of the value created—a
habit that originates
in the capitalist mode of production itself . . . conceals the very
transaction
that characterizes capital, namely the exchange of variable capital for
living labour
power and the consequent exclusion of the labourer from the
product.’[18] It
also conceals the central dynamic of capitalist production. It is not
the
antagonism for the share of the net product that underlies the
contradictions
of capitalist production, as the radical Ricardians would have it. It
is the
constant requirement to increase the exploitation of labour as
investment takes
place in order that sufficient profits can be produced to compensate
for the
tendency of the rate of profit to fall. ‘The progress of the
process of
production and accumulation must, therefore, be accompanied by a growth
of the
mass available and appropriate surplus labour and consequently by a
growth of
the absolute mass of profit appropriated by the social capital . . .
The same
laws, then, produce for the social capital an increase in the absolute
mass of
profit and a falling rate of profit. [19] It is such a process that
explains
the growing international competition. Competition does not harm
everyone’s
profits (shades of Adam Smith!) but it is only the large, firmly placed
capitals which can compensate for a fall in the rate of profit by a
rise in the
mass of profits. [20] It is the world-wide search for additional
profits to
compensate for the falling rate of profit that explains the growing
intensity
of international competition between large corporations, and the fight
to
divide and invest in the markets of the capitalist world. This is the
effect of
capital accumulation on a world scale. It is an effect that Glyn and
Sutcliffe
never manage to explain. [21]

The
key factor, as far as profitability is
concerned, is a rising productivity of labour, and hence a rising rate
of
exploitation. Both profits and wages can rise absolutely if
productivity
increases given the expansion of investment. After all, the
‘novelty’ of
so-called ‘scientific’ management was to be that it
makes ‘high wages and low
labour costs . . . not only compatible, but . . . in the majority of
cases,
mutually conditional.’[22] This was why, in the 1960s, firms
were prepared to
offer large incentives in order to introduce productivity deals.

The
view that there has been a decrease in
the rate of exploitation over the 1960s period, is based on an equally
incorrect theoretical analysis. The rate of exploitation has to be
understood
as a ratio of the surplus-value produced overall by productive workers
to the
wage of such workers. With the large increase of the public, financial
and
commercial sectors, a smaller and smaller proportion of workers may be
regarded
as productive in Marx’s sense. [23] It is just this point
that is ignored by
Glyn and Sutcliffe in interpreting their statistical data. This is all
the more
inexcusable when we take into account the fact that in Britain, for
example,
half of the labour force work in public services, the nationalized
industries,
or ancillary jobs in the public sector. Taxation would have to be
counted as
part of the surplus-value produced by productive workers and only the
net real
wages after tax of productive workers could be regarded as variable
capital.
Such a calculation would give us some indication of the enormous
increase of
the rate of exploitation since the Second World War. [24]

State
Expenditure and the Crisis of
Profitability

It is
the growth of state expenditure that
must be seen as one of the key factors in an explanation of inflation.
Glyn and
Sutcliffe do give some significance to the growth of government
spending. They
make the point: ‘As it became more difficult to maintain a
high level of
private investment, government spending has almost everywhere become
more
necessary to maintain high levels of demand and employment; but this
does not
solve the profitability problem.’[25] Indeed, in discussing
the immediate
period up to 1917 in Britain, they even attribute creeping inflation to
government spending. [26] This proposition is in no way developed. What
they
fail to show is how ‘all the methods of state interference on
behalf of
capitalism contain their contradictions.’[27] In arguing that
the state can
only avert the pressure on profitability if it can neutralize its
causes—wage
increases and international competition —they confuse
‘cause’ with ‘effect’.[28]
It is precisely the crisis of profitability that makes a growing state
expenditure necessary. The contradictions of state intervention have to
be
located at the point of production of surplus-value and not in the
distribution
of national income. It is to such an explanation that we now turn.

State
expenditure has played a significant
role in maintaining social and political stability since the Second
World War.
State intervention proved necessary in the reorganization and expansion
of
capitalist production after the war. This process could not be carried
out by
private capital alone and nationalizations of basic industries and
government
subsidies to private producers, state expenditures on military and
space
programmes, as well as on welfare, education and social security have
been a
necessary feature of the post-war boom and the ensuing stability. The
nature
and limits of this kind of expenditure, therefore, is a vital question
for
Marxist theory.

The
point about state expenditures is that
they are financed and paid for out of taxes or by budget deficit
financing and
government borrowings. The latter contribute enormously to inflationary
pressures as the money supply has to be increased and credit advanced
to
finance these expenditures. As interest on government debt has to be
paid back,
state expenditures financed in this way presuppose
‘future’ taxes and hence
future profitability. In both cases, present or
‘future’ surplus-value is
appropriated from private capital by the state in the form of taxes or
loans to
pay for these expenditures. This represents a decline in surplus-value
available for private capital accumulation. This is so because
state-induced
production is ‘unproductive’ from the point of view
of capitalism as a whole.
Although state expenditure ‘realizes’
surplus-value, the products bought by the
state do not function, in general, as capital, and therefore do not
produce
additional surplus-value or profits from the standpoint of society or
total
social capital. The finished products that the state buys are acquired
with
already produced surplus-value. The individual private capitalist
producing for
the state quite clearly gets the average rate of profit and
‘surplus-value’ is
produced by his exploited workers. But from the standpoint of society,
of total
social capital, ‘unproductive’ state-expenditure
constitutes a drain on
capital. So the profit acquired by the individual capitalist producing
for the
state comes to him only out of a redistribution of the already produced
surplus-value. The mass of profits produced is spread over a larger
base and,
therefore, the rate of exploitation must be increased faster than
before such
expenditure, in order to maintain the overall rate of profit.

We
have as a consequence, the following
mechanism. Private capitalist investment is insufficient to maintain
full
employment and social stability. The government must supplement
production for
the market with its ‘non-productive’ expenditure in
order to take up the slack
and reduce unemployment. But this is a capitalist expense indicating a
latent
tendency towards crisis, for government expenditure requires, indeed
necessitates, deficit financing and increased borrowing which leads to
inflation. This is because it is, in general,
‘non-productive’ expenditure and
so increases the purchasing power in the economy without a simultaneous
increase in profitable production. It has the same effect as that of
too much
money chasing too few goods. The price of commodities will rise and
this
includes that of labour power itself, which is, after all, a commodity.
The
inevitable increase of taxation in this period means that there will
have to be
a further rise in money wages in order that real wages can be at least
maintained. In order that state expenditure can be financed out of
surplus-value produced in the private sector of the economy, the rate
of
exploitation must be increased faster than before to prevent an actual
fall in
the rate of profit and a faster rate of inflation. The inflationary
pressures
are a necessary, albeit contradictory, part of the attempt to solve the
crisis
of profitability and stave off the tendency of the rate of profit to
fall.

It is
clear, therefore, that there are
limitations to ‘unproductive’ expenditure and other
government-induced demands
in a capitalist economy. If production grows faster in the
‘non-productive’
sector of the economy than in the ‘private’ sector,
the production of profit,
or surplus-value, relative to total production, declines more rapidly
than
before. More surplus-value must be produced from a smaller base of
productive
workers in order that the tendency of the rate of profit to fall is
checked. As
long as the productivity of labour can be sufficiently increased so as
to
maintain the rate of profit and finance the non-productive sector,
government-induced expenditure will indeed be the
‘cause’ of high employment
and social stability. But this process is self-defeating: to cope with
the
expense of the non-productive sector the exploitability of labour must
be
steadily raised. This means a higher organic composition of capital and
a
decline in the exploitable labour force relative to the growing
capital. To
maintain a state of high employment indefinitely, the non-productive
sector
must increase faster than total production. But this implies a slow
deterioration of private capital expansion which can only be halted by
halting
the expansion of the non-productive sector.

The
increasing concentration and
centralization of capital is, therefore, essential for increasing the
social
productivity of labour. Government induced production helps in this
respect
because the sheer size of the ‘state’s
orders’ leads to a restructuring of
capital in private industry. The enormous extension of credit
facilities is
necessary to finance the very large investment now needed to bring
about the
necessary and competitive increases in the productivity of labour. This
extension of credit is based on expected future profitability. This has
led to
recurring liquidity problems now affecting large corporations, and in
Britain,
nationalized industries. (In the case of UCS this was a shortage of
working-capital that had little relation to future profitability.)
Nevertheless, this investment must continue on an ever-increasing scale
if the
mass of surplus-value to finance both the private and state sectors of
the
economy is to be forthcoming. If it is not, or if state-induced
expenditure
grows too rapidly and the necessary restructuring of capital is not
achieved,
then we can expect the latent crisis conditions to take the form of an
actual
crisis.

The
increasing inflation in all capitalist
countries is an indication of how far the problems have developed. In
Britain
this has resulted in an increasing role of the state in giving the lead
to
private industry in the process of rationalizations. The large
expenditure
programme on the nationalized industries involves the loss of thousands
of jobs
and there are State subsidies to private enterprise to encourage it to
follow
suit. The direct attempt by capitalist States to control labour
relations
through incomes policies, industrial relations acts, and other methods,
are the
political counter-part of the process. A
‘disciplined’ labour force and
co-operative trade unions are considered essential if the
rationalizations and
increase in profitability necessary for the survival of capitalism are
to be
carried through. The continuing attempt to integrate the trades unions
into the
state apparatus represents a central part of this strategy.

In
such a context we can understand British
entry into the EEC. It is far from astonishing that ‘British
capitalists (are)
clamouring for entry into the market.’[29] It is essential
for British capital
to have full access to the markets of Europe if the restructuring of
capital
and rationalization programmes necessary for British capitalism to
survive are
to be carried through. Competition will not go away. There is no choice
for British
capitalism but to become part of Europe in a world of growing
imperialist
struggle. Only Europe can hope to compete with Japan and the United
States in
the new division of the markets of the world. It is the large efficient
capitals alone that can survive. The EEC represents a further attempt
of
capitalism to break down the barriers that capitalism itself has
created. The
contradiction between social production and private appropriation finds
its
expression in the total inability of any European nation state to
provide a
framework for the expansion and accumulation of capital. The British
ruling-class had no choice but to integrate and share the fate of
European
capitalism.

The
Crisis of British Capitalism and the
Crisis of Profitability

In
this section we intend to indicate
briefly how, for Britain, the facts give support to our analysis. Since
its
decline as a major imperialist power, the British economy has lagged
behind the
development of the other major industrial powers. It has therefore been
at the
forefront of the crisis of profitability. The entry into the EEC and
the
present Conservative offensive against the working-class, as we have
said
above, represent a last ditch effort of the ruling-class to stave off
the
present decline. One of the key factors in the relative decline of
British
capitalism can be seen in the small amount of gross domestic fixed
capital
formation (capital investment) as a percentage of the gross national
product in
comparison with other countries between 1960 and 1972.

Table 1[30]

Investment as a percentage of GDP

range from 1960 to 1972

Japan

30-35%

Germany

23-27%

France

20-26%

Britain

16-18%

US (excludes government expenditure on machinery and government

17-18%

The
investment in plant and machinery in
Britain was only about two fifths of total investment, that is, about 7
per
cent of GNP. Investment in the private sector as a share of total
investment
fell from 58·5 per cent in 1962 to 53·4 per cent in
1969, with the public
sector increasing its share.[31] As most public investment is
‘unproductive’
this would only increase inflationary pressures.

If we
look at British investment overseas,
we see a completely different picture. The outward movement of British
capital
was massive. Between 1962 and 1969 there was an increase of
£3,425 million in
direct investment abroad, £2,500 million in portfolio
investment and £12,575
million in financial claims, the latter indicating the enormous role of
the
City in international financial affairs. Although foreign investment in
the UK
was also substantial, British interests invested abroad were nearly 70
per cent
more than foreign interests invested here. This explains the great
pressure on
the British balance of payments. [32] The ‘stop-go’
policies of succeeding
British governments in their attempts to solve the balance of payments
problems
only contributed to the relative decline of British capitalism and led
to a
very small rate of growth throughout the whole period. Table 2 gives
the
comparisons.

Table2 [33]

Rates of Growth 1955-1968 Annual Percentage Rates

GDP

Japan

9.7

France (1959-68)

5.5

Germany

5.0

USA

3.9

Britain

2.8

With
this relative decline of British
capitalism in the face of increasing international competition, it was
necessary to increase government expenditure continually during the
whole
period in order to maintain full employment. This was accompanied by an
increase in taxation and the rate of inflation.

So
far we do not differ substantially from
Glyn and Sutcliffe in seeing the main structural causes of the decline
of
British capitalism. It is from this point onwards that the differences
in
analysis become clear. Thus, Glyn and Sutcliffe say: ‘Leaving
aside the
post-war devaluation year of 1968, the faster fall (of the share of
profit)
between 1964 and 1970 can be almost entirely explained by the
combination of
changes in wages and world export prices and the continuation of the
tendency
for the wages increases to have a greater and greater effect as
international
competition intensified. Stagnation had little to do with
it.’[34] Stagnation
had everything to do with it. It necessitated an increase in state
expenditure,
an increase in taxation and a decline in the share of net real wages
and
salaries (after tax) in national income due to the rising inflation.
The
following statistics indicate this.

Table 3 [35]

Percentage of GDP (factor cost)

1957

1960

1965

1968

1970

Total government expenditure

36.5

37.5

45.5

51.9

50.7

Taxation (total)

32.6

32.2

35.3

41.2

45.0

Social services (education, health, social security)

14.0

15.4

17.7

20.4

21.1

After
1968 government expenditure was more
than half the gross domestic product and by far the largest part of
that
expenditure was on social services (around 42 per cent). Taxation had
increased
from 32·6 per cent in 1957 to 45 per cent in 1970. Net take
home pay (after
tax, insurance, etc.) as a proportion of national income, has actually
fallen.

Table 4 [36]

Net take home pay (wages and salaries) after tax etc, as percentage of national income

1957

60.0

1960

58.8

1965

57.4

1968

55.9

1970

56.4

1971

55.9

The
figures for the growth of gross money,
gross real and net real income (after tax) for men manual workers, are
equally
instructive.

TABLE
5[37]

Annual
compound rates of growth

Gross Money Income

Gross Real Income

Net
Real Income

1956–60

5·0

2·9

2·1

1960–64

5·5

2·2

1·3

1964–68

6·6

2·5

0·5

1968–70

10·0

3·6

1·3

This
indicates how important it is to say
exactly what is meant by an increase in wages or the share of wages in
the
national income. [38]

If we
now look at the increase of
productivity per man over the period we can see that net wages after
tax grew
at a slower rate than productivity in Britain.

TABLE
6[39]

Output
per male equivalent man-hour

1955–60

2·7

1960–64

3·2

1962–67

3·7

1968–69

2·6

1969–70

4·2

1970–71

5·4

1967–71

3·9

Since 1962 the average has been about 3·8 per cent per annum.
On the other
hand, the average real net income increase per year for male manual
workers in
the same period was about 1·3 per cent and for all employees
about 2 per cent.
During this period the increase in inflation rates can be seen in Table
7.

TABLE
7[40]

Average
Annual per cent increases in
consumer prices

1956–62

2·0

1962–69

3·7

1969–71

7·9

Unemployment
between 1954 and 1964 was
reasonably low ranging from 1 to 2 per cent but since 1966 it has never
been
below half a million and by 1972 had risen to over one million (nearly
4 per
cent of the labour force).[41]

What
these figures show is that from the
mid-1950s there has been rising government expenditure,[42] increasing
taxation, a rising productivity of labour, rising inflation, rising
unemployment and a redistribution of national income away from wage and
salary
earners (this in terms of net take home pay). In spite of this, the
crisis of
profitability has continued. Figures given by Glyn and Sutcliffe for
the
pre-tax rate of profit show a decrease from 16·5 per cent in
1950–4 to 9·7 per
cent in 1970 and the post-tax rate of profit fell from 7·1 per
cent to 4·1 per
cent between 1964 and 1970. [43] Although these figures should not be
confused
with the rate of profit as defined by Marx, they do give an indication
of the
general tendency. Far from higher wages being the cause of the present
crisis
of profitability, it is an insufficient increase in the productivity of
labour
to finance profitably the private and growing state sector. Further,
our
figures suggest that an increase in the organic composition has taken
place and
a rise in the rate of exploitation. The former is indicated by the
growing need
to increase state expenditure to take up some of the increase in
unemployment
resulting from productivity increases. In spite of this unemployment
has grown.
The rise in the rate of exploitation is indicated by the productivity
increases, the increase in the state and
‘non-productive’ sector, and the fall
in net take home pay as a percentage of national income. The crisis of
profitability
[44], far from being caused by large wage increases, results from the
contradictions of capitalist production itself which has its expression
in the
tendency of the rate of profit to fall. This tendency is indicated
today by the
rising state expenditure, the growing trend of unemployment and the
increase in
the rate of inflation.

When
the Conservatives came to power they
promised to ‘reduce prices at a stroke’. Their
strategy was to cut government
expenditure and reduce overall taxation. Their aim was to bring about a
shake-out of labour from British industry in a process of
‘forced’
rationalizations at the expense of the working-class. They soon learnt
to their
cost that the contradictions of capitalist production cannot be removed
at a
stroke. The Conservative government which set out to cut public
spending is now
paying out £1·67 extra for every £1 it cut
back on in October 1970. It is also
paying out £1·30 in aid to industry for every
£1 that Labour spent in its last
year of office. Direct assistance to the shipbuilding industry alone on
the
past year was more than Labour spent in its last year helping all
industry
through the now defunct Industrial Reorganization Corporation. [45] All
this
was forced on the present government because a rising unemployment,
together
with inflation, threatened social stability.

The
Conservative reduction in taxation made
it the more necessary to increase government borrowing to finance the
increase
in government expenditure required. The total government borrowing
needed in
the year to April 1973 was £1,810 million, slightly lower than
expected and in
the year to April 1974 it is assessed at the huge sum of
£4,423 million. [46]
Such borrowing requirements lead to very high interest rates which only
make
matters worse by putting up the cost of private and local authority
investment,
house purchase, etc., and so adding to the pressure on prices. Part of
this
borrowing will not be met by increased saving and will therefore
require an
increase in the money supply and advances of bank credit, so
contributing
further to inflationary pressures. At the present time the rise in the
money
supply is still of the order of 30 per cent per year. Finally, the
inflationary
based expansions elsewhere in other capitalist countries has increased
the
demand for, and hence the prices of, basic commodities and raw
materials. This
has meant for Britain, a country that imports a large proportion of its
requirements, another contribution to inflationary pressures.

The
government’s strategy after the change
in policy forced on it by the working-class response to its initial
policies
(UCS, the miners struggle), has been to turn to an incomes policy. Both
the
wage freeze and Phase II are an attempt of British capitalism to
restore
profitability at the expense of the working-class. The aim is to create
a
climate that will encourage private capitalists to invest and bring
about a
restructuring of British capital which will allow it to hold its own in
the
EEC.

The
recent period has only confirmed the
tendencies we have indicated. The freeze and incomes policy have
brought a
further redistribution of income away from wage and salary earners.
Real wages
have actually been falling for a considerable time as a result of
rising
prices, especially for food and housing (including rents). The
government is
also contributing to a restoration of profitability in another way,
that is by
its expenditure programmes for the nationalized industries.

Throughout
the period the state has
attempted directly to give a lead to private industry in the process of
rationalization while at the same time supplying the basic inputs to
private
industry at a ‘reasonable’ cost. The massive
reduction of the work force in the
nationalized industries in spite of the large expenditures involved is
the indication
of this. The new expenditure programmes for the steel and coal
industries only
continue the general trend. The result of the enormous expenditure
programme
for the steel industry (£3,000 million) will be a loss of
about 50,000 jobs and
similar reductions are considered necessary in the coal industry. This
is an
attempt to make the working-class pay for problems inherent in
capitalist
production. The freeze on prices in the nationalized industries has
left nearly
all of them with large deficits. The government actually subsidizes
them to the
tune of over £500 million a year at the present time.[47]
This, together with
the increase in borrowing necessary to finance these
industries’ new
investment, only contributes to the inflationary surge. It is not
surprising
that, already, at the first sign of an expansion of the economy, cuts
in
government expenditure are planned.

There
is, indeed, no better indication of
the contradictions of capitalist production than the fact that with one
of the
fastest yearly growth rates of the British economy since the war and a
9 per
cent increase in productivity in manufacturing industry, unemployment
is still
extremely high (over 600,000) and the real wages of the working class
are
actually falling.[48] With the balance of payment problems looming
ahead this
inflationary-led mini-boom only reinforces the latent crisis
conditions. The
imperative is to increase the rate of exploitation. Whether this can
succeed
depends on the response of the working-class.

Strategy
for the Working-class

Unfortunately,
what the recent period
clearly indicates is that ‘militancy’ is not enough
if the response to the offensive
against the working-class is to be turned in the direction of a
struggle about
the system of production itself.[49] Economism, and the trade union
struggle
share the same ideological foundation as that held by the ruling-class.
It is
precisely this that has to be combatted politically. And, it is
therefore not
surprising that the faulty analysis in British Capitalism, Workers and
the
Profits Squeeze offers us little more than increased militancy as a way
forward
for the working-class.

We
have shown that the working-class is in
no way responsible for inflation. On the contrary, inflation together
with
increased taxation [50] has re-distributed net take-home pay as a
percentage of
national income away from the working-class. A demand that has real
relevance
in this situation and needs to be raised generally is that for
‘a rising-scale
of wages regulated by housewife and trade union committees’.
Such a demand
calls for automatic cost-of-living increases on the basis of a
working-class
index drawn up by housewives and trade unionists. It not only ensures
that the
working-class is not made to pay for inflation, but it also begins to
raise the
issue of ‘control’ in a concrete way. It says that
the working-class will
decide, through its own representatives who experience the problem
directly,
what is the rise in the working-class cost-of-living. It would involve
housewives directly in the struggle. And it suggests that the function
of such
committees should be extended to continued surveillance over prices.
This could
lead to investigations as to how and why price rises occur. It would
show how
the anarchy of capitalist production is the source of rising prices.
From this
the way forward points to the need to establish a society where the
consumer is
not faced with the continual struggle for existence that such anarchy
dictates.

The
rising-scale of wages clearly does not
preclude fighting for increases in working-class living standards, e.g.
claims
for £10, etc, as at Fords, but is additional to them in the
sense that it is a
means for preventing the erosion of such gains by inflation. The demand
should
not be confused with threshold agreements which allow certain increases
only after
a certain rise in the cost of living (e.g. 5 per cent), and then are
based on
the government’s own price index. The working-class must not
be deceived by
such agreements which still put the main burden for price rises on the
working-class. So long as the battle remains on a purely monetary level
the
working-class cannot win. No matter how militant the fight, any wage
increase
will be rapidly eroded so long as inflation occurs. Nevertheless to
extract the
demand for a rising-scale of wages . . . from the capitalists will
involve the
fiercest struggle which will necessitate the active involvement of wide
layers
of the class if it is to be successful. For it is a concession that the
capitalist class will give only as a last resort. For what is posed is
the struggle
for control, the control of the working-class over the capitalists to
the
extent of preventing them running the economy the way they choose. It
poses
concretely the fact that the working-class are not prepared to take
responsibility for capitalism’s problems. They want a stable
and improving
standard of living regardless.

We
have shown how the cooperation of the
trade-union leaders and their integration in the state apparatus
becomes a
necessity for capitalism in the present crisis. The Industrial
Relations Act
and incomes policies together with the ‘tripartite’
talks between the
Government, the TUC and the CBI are all parts of this process. They
represent
capitalism’s attempt to solve its problems at the expense of,
and possibly with
the agreement of, the working-class. The State is no
‘neutral’ body but
represents, as the present crisis has so clearly shown, the interests
of the ruling-class.
In the epoch of monopoly capitalism it is impossible for the unions to
remain
politically neutral or ignore the decisive role of the state.
Therefore, the
most important political demand that can be raised in relation to trade
unions
at the present time is for ‘the complete and unconditional
independence of the
trade unions from the capitalist state’. It is only on the
basis of a strategy
that incorporates this demand that the trade unions can be turned into
instruments serving the interests of the socialist revolution.

It is
in the light of this perspective that
the demand for democracy in the unions requires a political
significance. The
trade union leaders do not involve themselves in talks with the
employers and
the Government to defend their privileges from the rank and file.
Rather if
their reformist political relations with the capitalist class are to
survive,
then the freedom of the rank and file must be curtailed. The very same
shop
floor militants who often share the reformist illusions of the Trade
Union
bureaucracy are driven by the material conditions of their lives to man
the
flying pickets and occupy factories. Their activity, especially with
the
development of factory occupations, raises practically, if not
consciously, the
whole question of private property. To set strict limits on this
struggle is
therefore a political necessity for a reformist trade union leadership.

To
raise the social productivity of labour
is an imperative for British capital if it is to survive in the EEC.
The State
has already begun the process of rationalizations in the nationalized
industries and other investment programmes are planned or suggested
which will
mean large reductions in the work force elsewhere. The shipbuilding
industry is
the latest example. [51] The demand for ‘work or full
pay’ is the only one that
can seriously tackle rationalizations. It insists, once again, that
whatever
the problems of the ruling class, the solutions will not be at the
expense of
the working-class. The demand is, of course, not an alternative to
militant
struggles on the shop floor, e.g. occupations. Rather, it is an element
which
revolutionaries should seek to introduce into that arena.

Work
or full pay cannot be fulfilled by the
individual employer. In as much as the necessity for such a solution
becomes
rooted in the minds of the working-class it raises the question as to
what form
the solution should take. The demand is one which points to the
capitalist
class as a whole, through its agency the state, as those capable of
fulfilling
the demand, and thus directs the attention of the class to the true
nature of
the enemy—as a class that wields state power. It is not
difficult to argue that
any society worth a light would be able to provide such a minimum need.
And if
their society cannot provide it a socialist state would.

We
indicate by raising this demand that we
are not against an efficient organization of production as such, just
as we are
not against machines as such—we are against the effects of
rationalization
under capitalism. The question is: who benefits from rationalizations?
Why do
increases in the social productivity of labour lead to redundancies and
not to
an overall reduction in the time necessary to work and so on? The
demand allows
the alternative of planned production for needs to be discussed and
raised. It
is only demands such as those discussed above that can carry the class
struggle
forward in the direction of a political struggle about the system of
production
itself.

What
we have tried to show in this review
is how a Marxist analysis of capitalism has vital implications for the
class-struggle. If we have been extremely critical of Glyn and
Sutcliffe’s
book, it is because of the seriousness of the task they set themselves.
Their
book had the great merit of making a discussion of the capitalist
crisis an
essential part of the search for a socialist political strategy. The
information they gathered together in their book will be indispensable
for
future work. If this review can contribute to a discussion of the
central ideas
they have raised, they will hopefully appreciate its critical tone. May
1973

Notes

[1]
Penguin Books 1972, 40p.

[2]
Ibid., p. 215.

[3]
Ibid., p. 214.

[4]
Ibid., p. 201.

[5]
Ibid.

[6]
Wilfred Beckerman ‘Inflation and the
Class Struggle’ in the New Statesman, 8 December 1972, p.
858.

[17]
Andrew Glyn has, in fact, written an
article which attempts to show on the basis of a
‘corn’ model that the organic
composition need not necessarily rise with increases of the
productivity of
labour. See CSE Bulletin, op. cit., pp. 93–104. For a
criticism of this model
see an article by Robin Murray in the CSE Bulletin, Spring 1973, pp.
53–5.

[18]
Capital, Vol. I, op. cit., p. 533.
While Glyn and Sutcliffe do not deduce ‘a false semblance of
association’ from
their method, nevertheless in seeing in the division of income between
capital
and labour the most fundamental question they obscure the central
issue, op.
cit., p. 54 and p. 57.

[21]
It surely must be regarded as a piece
of outright impudence that Beckerman, clearly no expert in Marxist
political
economy, is able to get away with pointing out to the authors the ABC
of
Marxism on the question of competition and the rate of profit. It
underlies the
weaknesses that exist throughout the book. See New Statesman, 5 January
1973,
p. 16. Glyn’s reply to Beckerman (New Statesman, 12 January
1973, p. 51) shows
he has still not understood this point.

[23]
See my article, op. cit., for a brief
discussion on productive and unproductive labour. pp. 11–14.
See also Ian Gough
‘Productive and Unproductive Labour in Marx’, New
Left Review 76,
November–December 1972.

[24]
As I pointed out in my article I
consider the practical difficulties involved in making the separation
of
productive and unproductive labour well nigh impossible, op. cit., p.
14.

[25]
Glyn and Sutcliffe, op. cit., p. 73
and pp. 100–101.

[26]
Ibid., p. 22.

[27]
Ibid., p. 49.

[28]
Ibid., p. 176 ff.

[29]
Ibid., p. 172.

[30]
These figures are approximate and are
taken from the Economist, 31 March 1973, Survey on Japan, p. 15.

[38]
The figures for all employees show a
higher real net income growth (1964–8, 1·2 per cent;
1968–70, 3·4 per cent).
This is an increase of nearly one third as much again over the period
as
increase for male manual workers. The difference is due to the price
index
used. The one for male manual workers reflecting the cost of wage
earners
consumption which includes a greater proportion of food and housing
expenditure, ibid., p. 67.

[42]
It should be remarked that although a
great deal of government expenditure is on social services, this still
has to
be regarded as coming out of gross profits. It is the real net wage of
productive workers that constitutes variable capital. The rest is a
cost that
private capital must pay for social stability, etc. As such goods are
paid for
out of surplus value already produced (taxation, etc.) their production
does not
add to total social capital and hence to surplus-value from the
standpoint of
society. They are a capitalist expense even if unemployed workers and
others
benefit from such expenditure.

[43]
Glyn and Sutcliffe, op. cit., p. 66.

[44]
The authors acknowledge in the
postscript of the book that in the recent period ‘part of the
gain in
profitability came from the large increases in productivity (6 per cent
in
1971) which was a result of the continued surge of
redundancies’, op. cit, p.
217. The recent rise in the rate of profit (in the sense used by the
authors)
is clearly due to large productivity increases.

[48]
Economist, 5 May 1973, p. 73, and 12
May 1973, p. 65. Already for December 1972 The Times reported a slight
fall in
average pay for manual workers (22 February 1973). While the retail
price index
has increased by 3·4% from October 1972 to March 1973 (and by
4·7% to April
1973), basic hourly earnings over the same period have increased by
1·3%.
Average earnings from October 1972 to February 1973 increase by
2·1%. (See
Labour Research Bulletin, vol. 62, no. 6, June 1973, p. 143.) The
Economist (26
May 1973, p. 67) confirms this view. Retail prices increased by
4·7% in the six
months after the freeze whereas average earnings to March were up by
only 3%
since the freeze. This is to be compared with the real rise in take
home pay in
the previous year due to the overall reduction of taxation in 1972.
Many
workers, however, did not benefit from this rise as they were caught in
the
freeze at the time their wage increase was due. In a recent
contribution A.
Glyn suggests that the rise in living standards for 1972 was nearly 7%
although
he holds the view that a fall in workers’ living standards of
the order of 1%
or 2% is likely in 1973 (CSE Bulletin, Spring 1973, p. 52). It is too
early to
assess the significance of these changes although the general trend of
increasing labour productivity, well above the rise of real wages, is
clear.

[49]
It should be noted that as far as
militancy goes the British working-class, if strike statistics are
anything to
go by, was not exceptional. See Anthony Barnett ‘Heath, the
Unions and the
State’ in New Left Review 77, p. 24ff.

[50]
Marginal tax rates for the
working-class have also risen because tax-free allowances have not
grown as
fast as inflation.

[51]
See article by John Fryer in the
Sunday Times, 20 May 1973, p. 60. The possible redundancies run from a
level of
23,000 jobs to 11,000 depending on the level of support the industry
receives.